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Monday, 26 September 2016

Builders
attribute this to reduction of interest rates on housing loans

There
are more than 80 apartment complexes under various stages of completion in
Mysuru city.— PHOTO: M.A. Sriram

The residential property market in
Mysuru city is showing signs of an upswing although the demand for commercial
property remains muted.

The relative upswing in residential
units comes after years of stagnation and builders attribute the positive
sentiment to reduction of interest rates on housing loans. Besides, a general
rise in wages across various sectors has contributed to the positive sentiment,
according to N. Subramanya, chairman, Builders’ Association of India (BAI),
Mysuru chapter.

He toldThe Hinduthat both the builders and plot
developers vouch for the positive sentiment in the market and since the
property rates have been stagnating for sometime, they aver this is the best
time for end-users to invest.

There are more than 80 apartment
complexes under various stages of completion in the city and the majority of
the buyers are salaried class with roots in Mysuru or Bengaluru, said A.R.
Ravindra Bhat, former chairman, BAI, Karnataka chapter.

The spurt in demand for housing is
fuelled by end-users while investors with a long-time horizon are looking at
vacant sites, he added.

Stagnating commercial
property market

However, Mysuru as a Tier 2 city with
potential to draw FDI in real estate is bleak for now as various studies have
indicated that the focus of investors will be on major metros which continue to
be the economic drivers.

Lack of job opportunities, poor growth
of the IT sector in Mysuru and a sluggish industrial development have put the
brakes on the growth in the commercial property market in the city for now.

The rate of returns does not match the
investment and hence developers in Mysuru are not opting for commercial
property development.

Some of the major retailers, with a
chain of malls across the country, have sold their franchise in Mysuru or have
shut shop underling the prevailing downswing in the commercial property sector.

“For an investment of Rs.1 crore a
rental of at least Rs.60,000 is essential to break even … but the prevailing
rentals is lower than Rs.40,000,” Mr. Bhat said.

But improvement in connectivity with
the completion of the double line track and expansion of the four lane road to
six lane between Mysuru and Bengaluru may turn the market around in the long
run.

The stakeholders are also hopeful that
the ongoing development of new industrial estates around Mysuru and the
benefits of reduced cost of operations may spur industrial investment in the
long run to fuel commercial property development.

Friday, 23 September 2016

"Last time we had received over 10 lakh applications,
both online and offline, but this time we are thinking of making it totally
online," an official said.

NEW
DELHI: From "application to refund", the DDA is mulling making its
next housing scheme a completely online affair to reduce the long queues of
flat aspirants at its headquarters.

"Yes, talks are going on to make the next DDA
housing scheme fully online. Last time we had received over 10 lakh
applications, both online and offline, but this time we are thinking of making
it totally online," a senior DDA official said.

Delhi Development Authority is slated to come out
with its next housing scheme in December.

As per recent reports, about 11,000 flats are to
be offered under Housing Scheme 2016. Sources said, a large chunk of these may
include flats surrendered by owners to DDA, which works under the Urban
Development Ministry.

Former DDA Vice Chairman Balvinder Kumar had in
January 2015, however, said the "new scheme would be much larger than the
2014 project, and will include at least 24,660 LIG flats."

The government last week said, over 40 per cent of
the houses allotted by the DDA under its Housing Scheme 2014 have been
surrendered or cancelled with some allottees complaining about the size of the
flats and locality.

"The DDA has informed that out of 25,039
flats for draw of lots in the Housing Scheme 2014, 10,653 flats have been
surrendered or cancelled," Minister of State for Urban Development Rao
Inderjit Singh said in a written reply in Rajya Sabha.

"We are in talks with certain vendors for
upgrading our infrastructure to handle the expected increase in traffic, but
nothing finalised yet. But, we are technologically capable of handling the
online rush," he said.

The draw of lots for 10,08,985 applications, the
highest in DDA history, was held on November 25. For the first time the urban
body had also webcast the draw process.

In 2014, the online response was so massive that
the DDA's official website crashed soon after the launch. The one- bedroom
apartment flats were offered in Dwarka, Rohini, Narela and Siraspur areas.

"We would upgrade our technical
infrastructure but the number of applicants are likely to be less this time
round as not everyone has online reach. But, we will equip our set up so as to
handle the augmented traffic," he said.

"From in line (queues), we want to bring
people online," the official said.

Thursday, 22 September 2016

The builders claim that they have processed all papers for
procuring occupancy certificates from the Noida Authority and it is only a
matter of time before they get them.

NOIDA:
Over 350 residents of Skytech Mattrot, a residential complex in sector 76, Noida
took to the streets to protest against builders for delays in procuring
occupancy certificates from Noida Authority. The residents claim that out of
total 716 flat buyers, 450 have moved into their apartments and are living
without occupancy certificates. In all 550 handovers have been done.

"We fear that with the stamp duty and circle
rates slated to go up, the buyers would have to bear the brunt of extra
expenses. We have been pressing for a speedy processing of procuring occupancy
certificate, but nothing has taken place," Saurabh Sinha, a resident of
Skytech who participated in the demonstration on Sunday, said.

"The residents have been facing multipronged
problems starting with charges to maintenance quality. The occupancy
certificates and registration concerns are immediate. We are the only apartment
complex in the vicinity which has not got the certificates," Gurpreet
Singh, a Skytech resident, present at the protests, said. The residents
displayed banners and shouted slogans, stating their claims.

"People have purchased stamp-papers, months
ahead, waiting to get their houses registered. Nothing has moved. We are
feeling impatient now," Sinha added. The buyers claim to have sent a
letter to the builder stating their concerns.

Meanwhile, the builders claim that they have
processed all papers for procuring occupancy certificates from the Noida
Authority and it is only a matter of time before they get them.

"We have processed all paper work and the
application for the procurement of OC has been made with the Noida authority.
The processing of documents for occupancy, takes time, so the buyers need to be
patient. We have communicated this to them previously. We hope that the
apartments would be granted OC by the end of year," Mayank Chawla, Director,
Skytech group, said.

Monday, 19 September 2016

Referred to as 'undivided share of a given floor' in realty
parlance, this virtual space leasing model ­ already popular in metro cities.

HYDERABAD:
It's a new wave of investment that's sweeping Hyderabad's iPad-toting Gen Y
populace off its feet these days. With a 'savings' deposit of Rs 10 lakh to Rs
12 lakh tucked neatly away in their accounts, this dividend-driven clan is
giving a miss to the latest Honda 'hot wheels' to instead park their moolah in
'virtual' properties. Location: some corner (literally!) of a swank commercial
tower along Hyderabad's IT corridor.

Here's how it works. Referred to as 'undivided
share of a given floor' in realty parlance, this virtual space leasing model -
already popular in metros such as Bengaluru, Mumbai and Chennai - allows an
individual to own a small piece of property within an expansive building
housing offices and private businesses.The rent earned from these firms is
transferred to the owner depending on the size of herhis property, which can be
just about 100 sft! For instance: a 100 sft space in a building leased at Rs 40
per sft attracts a rent of Rs 4,000 per month.

"So, instead of buying a house that can cost
anywhere upwards of Rs 45-50 lakh, a young investor can spend a smaller amount
and be part of a group of people who have together bought an office space. This
assures a stable rental income every month and the return on this investment - anywhere
between 6% and 6.5% of the total investment - is much higher than the 2%-2.5%
return that residential properties offer," explained Sandip Patnaik,
managing director, Jones Lang LaSalle (JLLHyderabad), a global real estate
consultancy firm. Recommending it to the MNC-crowd, Patnaik said the trend is
here to stay.

It was in early 2015 that this investment model
made its foray into the local `hi tech' market, with Bengaluru-based major
developer Puravankara Projects Ltd throwing open the doors of `Purva Summit' in
Kondapur to buyers. Total area up for grabs: roughly 3 lakh sft. Subsequently,
city-fir m Kapil Group, through its venture `Kapil Towers' in Financial
District, added another 2.5 lakh sft to this supply. "This works well in a
city like Hyderabad that's fast becoming a hub for MNCs. An individual with
just about Rs 10 lakh to spare for investment can buy a space in our premises
(minimum size: 120 sft) and earn a steady monthly income. Also, we assure a 15%
escalation in rent every three years," said a senior executive with Kapil
Group, while dismissing fears of fraud among some market analysts. "It is
just like buying any property - complete with salelease deeds," he added.

Commercial rents in the area currently stand at Rs
40 per sft.

While chartered accountant Ritesh Mittal agrees
it's a `wealthy' proposition, he does sound a word of caution. "Because an
area is shared by multiple people and an individual doesn't exactly know which
part of the property shehe owns, the credibility of the developer (from whom
one is buying) becomes very important. The documents must be legally vetted and
all transactions between parties must be completely transparent," Mittal
said, confessing to many `friends' and `clients' turning to such investments of
late.

"Also, those opting for it must be certain
they are in it for long-term monthly income. Those looking at short-term
holding (liquidating funds within a few years) must stay away from it.
Otherwise, they'll never recover the capital amount," he added.

Predictably, biggies like Puravankara are
targeting only `mature' investors with at least one home in their kitty. And
that's also because the company's rate card for this property, which started at
Rs 6,500 (base price) per sft last year, has already touched Rs 7, 380 per sft.

"Yet, it's a profitable model because the
rentals in this part of Hyderabad have already touched Rs 55-60 per sft,"
said Ashish Puravankara, managing director of the firm. He added: "In
fact, contrary to what many believe, this concept has generated tremendous
interest in Hyderabad, where supply is still limited. Going by that, we have
now launched a fresh floor for leasing in our seven-storied building."

Friday, 16 September 2016

The
associates had allegedly failed to provide possession of an apartment located
at Mhalunge village near Balewadi, despite accepting the entire payment from
the buyer.

PUNE: The Hinjewadi
police booked a prominent city-based builder and his associates for cheating.

The associates had allegedly failed to provide
possession of an apartment located at Mhalunge village near Balewadi, despite
accepting the entire payment from the buyer.

Ashwin Dudharam Gondane (35) of Hadapsar lodged a
police complaint on Saturday, following which the builder and his associates,
who have offices on East Street in Camp, were booked under the provisions of
Maharashtra Ownership Flat Act, 1963.

According to the complaint, Gondane booked an
apartment in the scheme in January 2012. Gondane was impressed with the floor
plan and amenities provided by the builder in the area that was near Hinjewadi
IT park.

He booked the apartment of 650sqft carpet area in
wing number five. When contacted, Gondane told TOI that while booking the flat,
the builder had promised to give the possession within an year. However, at the
time of registration, the builder mentioned a clause in the agreement that the
possession would be given three years after registration.

However, the builder failed to provide possession
within the deadline. Despite repeated requests and after accepting the full
payment of Rs 38.96 lakh, the builder has not yet given handed the apartment over
to Gondane.

Inspector Vishwajit Khule of the Hinjewadi police
station told TOI that the builder had claimed that he would provide many
amenities in the society but none of them were provided.

Gondane said that when the builder came to know
that his customers were going to approach police, he sent an e-mail and told us
that he would get the occupancy certificate by December 2016, and promised to
hand over the flat immediately after. "We know that the builder is not
going to get the occupancy certificate as the site does not have an access
road. Moreover, the promised amenities have to be completed as yet," he
said.

Gondane said that he is finding it very difficult
as he has to pay the bank's interest as well as the rent of the flat that he is
currently staying at. "Along with me, about 80 others are waiting for the
possession of their flats," Gondane said.

Thursday, 15 September 2016

Sebi has eased some rules, but
cumbersome legal process and time taken to aggregate assets stand in the way

Eight years, four consultation
papers and countless relaxations in norms later, the introduction of real
estate investment trusts (REITs) in India is still at least a year away.

While the capital markets regulator has
eased rules for asset valuation and related-party deals, onerous legal and
listing processes, and the time taken to aggregate assets stand in the way.

Restructuring and consolidation of
commercial office portfolios by developers at DLF Ltd, one of the first
companies that expressed an interest in introducing a REIT, will also likely
add to the delay.

On 18 July, the Securities and Exchange
Board of India (Sebi) unveiled proposals aimed at making REITs more attractive.
This included allowing them to invest in holding companies which have a
multi-layered structure of real estate asset ownership, expanding the
definition of real estate to include hotels and hospitals, allowing REITs to
invest more money in under-construction projects and increasing the number of
sponsors to five from three.

While welcoming the move, real estate
industry executives also said that it will take time for companies to access
funds by listing REITs.

Companies such as Blackstone Group LP,
Embassy Group, Panchshil Realty, RMZ Corp. and K Raheja Corp. have all drawn up
plans to introduce REITs, but no one expects to list before 2017.

“It will take another 18 months for us to
do a listing. An intensive process precedes a REIT which includes
consolidation, meeting investors and a number of financial and legal matters,”
said Jitu Virwani, chairman, Embassy Group.

The property developer, along
with global investor Blackstone Group LP, is planning a $3-billion REIT
involving a portfolio of at least 37 million sq. ft. This will include their
jointly owned assets as well as some of Blackstone’s own assets, Virwani said.

Blackstone’s other partner, Pune-based
Panchshil Realty, which has a 12 million sq. ft of completed, rent-generating
office portfolio and an additional 6 million under construction, is also
looking at a REIT with Blackstone “sometime next year”, said its chairman Atul
Chordia, adding that the process is on.

However, it remains unclear if Blackstone
will do a single REIT listing with its partners in India, or separate ones with
respective partners.

Blackstone is the largest commercial
office space owner in the country, with 50 million sq. ft spanning 16 assets in
five cities.

Blackstone didn’t respond to an email
query.

Similarly, Bengaluru-based RMZ Corp.,
backed by the Qatar Investment Authority, plans to launch a REIT, but is
unlikely to do so before 2018, said co-owner and corporate chairman Raj Menda.

The firm is still actively looking for
acquisitions and is in the process of buying out office assets in different
parts of the country. For practical reasons, only once it has a significantly
sized portfolio, will it actually do a listing.

Just like RMZ, Tata Realty Infrastructure
Ltd (TRIL) and its investor partner Standard Chartered Private Equity, through
their partnership, will eventually do a REIT; but right now, the focus is on
buying new land parcels and developing them. They may also buy out office
assets.

“The quality of the offering and the
macroeconomic factors are critical and has to be attractive for retail
investors. Few developers have the desired volume of assets and they need to
aggregate a bit more. With more volume, risks of vacancy get diluted and will
generate better yield. Also, interest rates need to fall further to ensure
better returns for investors,” said Abhishek Goenka, partner, direct tax and
real estate expert, PricewaterhouseCoopers India.

Despite the delays, REITs remain a doable
and convincing option for developers and investors to monetize their commercial
assets, aided by the fact that the commercial office sector has been the only
bright spot in a lacklustre real estate sector in the past three years.

Rental rates have been consistent, take-up
of space has been healthy, accompanied by tremendous interest from investors in
buying good-quality office properties. According to an estimate by property
advisory Cushman and Wakefield India, the assets that may qualify to be
included in REITs may reach $20 billion by 2020. In the first three to five
years, as much as $12 billion could be raised.

The country’s largest realty developer by
market value, DLF, too is drawing plans to launch its first domestic REIT to
extract maximum value from its large office portfolio, according to a person
close to the firm. However, it is in the process of selling a 40% stake in its
commercial property arm, DLF CyberCity Developers Ltd, owned by the promoters
to institutional investors. “Once the stake sale is done, or alongside, the
company will also do a share sale and once the promoters infuse the money
generated from the stake sale back into DLF, the company, along with its
investment partner will look at launching a REIT,” the person added.

DLF said earlier this year that it is
preparing for REITs worthRs.6,000 crore in the next two years. The realty firm
plans to list its commercial office assets and eventually, also its retail
shopping mall portfolio. It has been ramping up the latter by structuring
ownership of existing assets in order to facilitate potential monetization
either through REITs or otherwise in the future.

Another large commercial office space
owner, Mumbai-based K Raheja Corp. is also working towards a REIT but
alongside, it is now focusing on selling a stake in its rental portfolio to
raise capital.

If these REITs are indeed introduced in
2017, it will be almost a decade since the markets regulator first introduced
the concept of this new investment vehicle.

While Sebi has been continually attempting
to ease the norms (see timeline), issues related to holding structure,
tax problems and disclosure norms made companies unenthusiastic of floating
this product.

It was only after the government stepped
in and exempted REITs from dividend distribution tax and minimum alternate tax
on capital gains made through transactions of REIT units, that realty firms,
anticipating regulatory relaxations, started drafting REIT launch plans.

Monday, 12 September 2016

Residential real estate market is currently in a correction
phase, which began three years ago, and according to experts, will last for a
few more quarters.

Buying
real estate is widely considered a safe bet by Indian investors, even though
the market might show otherwise. Like every other market, real estate too has
its highs and lows. For instance, the real estate market boomed between 1988
and 1994, and most property prices went up by over 10 times during this period.
However, the bear market that followed was very challenging. By 2002, many
properties were being put on the market at half the peak price they achieved in
1994. If one considers the high rate of inflation during the 1994 to 2002
period, the actual correction during the bear market was more than 75 per cent.
A similar trend seems to be playing out now. Investors minted money in
residential real estate during the boom that occurred between 2002 and 2013,
with prices going up by 6-10 times in several pockets. However, experts caution
against expecting similar returns in the future, because the maximum
appreciation happened in some nascent markets like Gurgaon. "It was as an
aberration, reflecting the times and the fact that markets were in a very
nascent stage. It is not fair to expect that kind of appreciation in developed
markets," says Amit Oberoi, National Director, Knowledge Systems, Colliers
International (India).

All
speculative markets move in cycles, and the real estate market in no exception.
As is evident, the boom in the residential real estate market is over. It is
currently in a correction phase, which began three years ago, and according to
experts, will last for a few more quarters.

Lack of buyer interestThe market has witnessed a marked decline in the
number of people buying residential properties. One of the main reasons for
this is the fact that property prices remain high compared to the average
income of individuals. "There is end user interest, but what buyers are
waiting for is reasonable and affordable prices," says Sunil Sharma, CIO,
Sanctum Wealth Management. "As of now, end users are only looking at
projects that are priced appropriately," he adds.

Since the real estate prices vary significantly
across cities, the concept of affordability also needs to be analysed at the
city level. Affordability is also affected by interest rates and increase in
income. Fall in housing loan interest reduces the EMI and increases
affordability. Although the RBI has cut benchmark rates significantly in the
recent past, its transmission was much smaller. For example, home loan rates
came down only by 50-75 bps compared to 125 bps cut by the RBI, which did not
result in any significant pickup in demand. The rise in income over time also
failed to keep pace with the significant jump in real estate prices that
occurred between 2002 and 2013.

Rental yield, which is the amount of rent paid per
annum over the cost of buying a property, is another factor that determines the
level of demand, for both end users and investors. If the rent is higher than
the EMI to be paid for purchasing a property in a given area, people are more
likely to choose buying their own home over living in a rented property. This
means that the end user demand will go up if the rental yields are high.
Similarly, the return for investors who buy houses to rent out also go up and
this will increase the investment demand. However, rent didn't increase in
tandem with the jump in capital values either, and as a result, the rental
yield has dropped to a significant low, ranging from 2-4 per cent compared the housing
loan interest rate of around 9.5 per cent.

Inventory build-upAs a result of the dip in the demand for property,
investors and builders, who developed and hoarded residential properties
expecting prices to rise, found themselves unable to sell their inventory. The
unsold units in eight large cities in the country have already hit an all-time
peak of 1171 million sq ft, up by 22 per cent from last year. If the current
rate of sale persists, it will take more than three years to exhaust the
existing inventory. "Compared to an ideal inventory level of 8-12 months
at the national level, current inventories are close to 45-47 months,"
says Pankaj Kapoor, MD, Liases Foras Real Estate Rating & Research.
However, the inventory build-up would have been much higher if the builders had
not reduced the number of new projects.

Pricing pressuresThe cost of construction has risen steadily over
the past few years. With the introduction of Real Estate Regulator, the
compliance cost is also expected to go up. However, builders may not increase
the prices of units, because the large inventories they hold have cut down
their pricing power. "Instead of increasing prices, developers will try to
restore the sales volume first," says Samantak Das, Chief Economist and
National Director, Research, Knight Frank India.

The inventory build-up and lack of pricing power
has impacted the financial health of builders. This, in turn, has resulted in
significant delays in property delivery. Since it has reduced the number of
'ready to move in' flats going up for sale, there has been no price correction
for ready procession flats. With project completion delays becoming the norm,
consumer preference for ready-to-occupy properties has also increased.

Although builders have been able to manage some
price stability so far, they are now failing to sustain it. "The small
fall in interest rate is not helping builders because their borrowing cost is
still astonishingly high at 22-25 per cent," says Feroze Azeez, Deputy
CEO, Anand Rathi Private Wealth Management.

"High cost during muted demand is putting
pressure on developers to scale down their prices, and many builders are now
reducing their launch prices by 20-25 per cent," he said.

New investors bewareSo how should one proceed in the current market
conditions? That depends on what kind of deal you are looking for. While this
might be the perfect time for buyers to start searching for their dream home
and cash in on good deals, experts say that investors should stay away for a
few more years. "We do not think fresh investments in high value
residential real estate will generate returns like it did in the past,"
says Sunil Sharma, CIO, Sanctum Wealth Management. Azeez holds a similar
opinion. "We have held a negative view on residential real estate for the
past few years, and expect it to go through two or three more years of time
correction," he says.

According to experts, even if the prices witness
no correction and remain stagnant over the next few years, there is no reason
to invest in real estate, since there is a significant cost associated with
holding property. "If we consider the mortgage rate of 9.5 per cent as the
cost of holding, the total return is not likely to exceed that," says
Sharad Mittal, Director and Head, Real Estate Fund, Motilal Oswal Real Estate.

Drive a hard bargainSome
industry experts feel that buyers should take advantage of the current turmoil
in the residential market, instead of avoiding it. "Smart people buy when
the market is perceived to be weak. Since builders are offering great
flexibility in pricing and payment plans now, this is a good time to buy. But
buyers should bargain hard for a better price," says A.S.
Sivaramakrishnan, Head. Residential Services, CBRE South Asia. Oberoi concurs
with this view. "Instead of avoiding residential investments, one should
look to invest now, albeit with a lot of due diligence, and wherever possible,
buy at a discount," he says.

If you are aggressive investor and do decide to
enter the market now, experts recommend opting for under-construction flats
over ready procession ones, as the discounts on the former have gone up
significantly.

"The right approach in the current market
environment is to invest in under-construction projects by reputed developers,
in growing locations. These developers will deliver on the promised quality as
well as possession timelines," says Anuj Puri, Chairman and Country Head,
JLL India. At the same time, aggressive investors also should shed their normal
habit of buying real estate only in their home towns. "Investors should be
slightly adventurous now. They should study the market across several cities to
identify demand movement and hot investment corridors," says Puri.

Friday, 9 September 2016

NOIDA:
Realtors' association Credai has appealed to chief minister Akhilesh Yadav to
stop the proposed increase of Noida's circle rates while homebuyers will hit
the streets in protest against being forced to cough up more for already
delayed flats.

A
day after the Noida administration revealed its draft proposal to sharply
increase circle rates - which decides stamp duty on a flat's registry - there
was widespread unhappiness about the decision. Credai, which sent a memorandum
to the CM, said market conditions called for a decrease in circle rates, citing
the example of Haryana, which recently slashed circle rates by 15% in Gurgaon
to lift the real estate market out of a prolonged slump.

Suresh
Garg, secretary of Credai (western UP), said, "The proposal to increase
circle rates in Noida will affect the already sluggish market in a big way.
Plus, the government has already decided to implement the 2% increase in stamp
duty (from 5-7%). Increasing circle rates up will lead to a huge burden on new
and potential buyers.

Circle
rates are already high in Noida, in many cases higher than the market rate.
It's a reduction of rates that is in order"

Homebuyers'
groups, already disgruntled with delayed possessions and other issues like
steep maintenance charges, were furious.

"Why
should buyers suffer because of delays by builders? We are going to demand that
our registrations be done at the same rate applicable when we bought our
houses. The buyers should not suffer because the builder has failed on its
commitment," said Shweta Bharti, general secretary, Noida Extension Flat
Owners' Welfare Association.

Thursday, 8 September 2016

The powerful builders' lobby, fearing the circular would open
floodgates of police complaints against them by aggrieved flat buyers, wants
the government to cancel it.

Mumbai: The state police has not withdrawn its
circular directing senior cops to register cases against builders who cheat
buyers, special inspector general of police Prabhat Kumar told TOI on Thursday.

It will, however, legally examine it further for
any loopholes following a letter from the state home department to the director
general of police on Wednesday stating that the circular is "inconsistent
with provisions of the Act".

The powerful builders' lobby, fearing the circular
would open floodgates of police complaints against them by aggrieved flat
buyers, wants the government to cancel it.

Those opposing the circular are bodies such as the
Marathi Builders Association, Pune, Maharashtra Chambers of Housing
Industry-CREDAI and National Real Estate Development Council. Developers
complained that holding builder solely responsible is a dangerous sign for
business, especially when there are frequent changes in building rules and
regulations. Construction industry sources said the general belief is that the circular
has been scrapped following the home department's letter. In fact, sources said
there is pressure on the BJP-led government to cancel it.

Kumar, who issued the circular, said the police
will continue to take action against errant builders under the provisions of
law. "The home department has not directed us to withdraw the circular. It
has only pointed out some lacunae. We will legally examine it again following
the home department's observation," he said.

Kumar has sought action against builders under the
Maharashtra Ownership Flat Act (MOFA)-1963. However, the state housing
department said the police cannot use MOFA because this Act has now been
scrapped and replaced by the Real Estate (Regulation & Development) Act.
2016. The state law and judiciary department, however, opined that certain
sections of MOFA are still in force. After looking at both opinions the home
department cautioned that the DG's circular seeking action under MOFA may be
contrary to these opinion.

Sudip Mullick, a partner with the construction
practice of law firm Khaitan & Co, had earlier told TOI that the old law,
MOFA, is still in force in the state. "The government has only notified
certain sections of RERA. The relevant sections of the new Act (like provisions
of action to be taken against builders for delay, etc) have still not been
notified by the state. MOFA has not been repealed," he said.

Early
this month, the state police directed police stations across Maharashtra to
register complaints against builders who cheat flat buyers and violate building
norms. The circular said complaints include builders failing to hand over
possession on time to buyers or developers who deliver apartments without
procuring the mandatory building occupation certificate.

Tuesday, 6 September 2016

The high court disagreed with the trial court that the plot
was a Mhada property and provisions of Maharashtra Ownership of Flats Act did
not apply to it.

MUMBAI: In a relief
for residents of a building on St Michael Church property at Mahim, the Bombay
high court has directed the trial court to decide afresh whether a builder
should be restrained from carrying out construction of a multi-storeyed tower
on plots reserved for three gardens.

Justice R M Savant
heard an appeal by members of Our Lady of Vailankanni and Perpetual Succour
Housing Society against the dismissal of its application against Suraj Estate
Developers by the City Civil Court. The high court disagreed with the trial
court that the plot was a Mhada property and provisions of Maharashtra
Ownership of Flats Act did not apply to it.

The judge, said that
in the instant case, it cannot be said that the property belongs to or is
vested in the housing authority which is a pre-requisite for provisions of the
Mhada Act to be applied.

"Merely because
the redevelopment is in respect of structures which are amenable to cess which
a private landlord is required to pay to the municipal corporation, it would not
mean that the properties either vest in or belong to the Mhada," said
Justice Savant, while ruling that the trial court's order that Mhada Act is
applicable on the plot is unsustainable. The trial court is directed to decide
the issue within six weeks and also look into what will be the effect on the
redevelopment vis-a-vis the obligations under MOFA.

The residents had
moved the trial court for directing the church, the owner of the land on which
the building stands, to execute a deed of conveyance in favour of the Society.
It was in this matter, the residents sought an interim restraint on the
builder.

They argued that a
clause in the agreement between Suraj and the flat purchasers provides that it
shall be subject to the provisions of MOFA.

Also, that the
developer cannot construct without the consent of the Society. But the trial
court dismissed their plea saying development is being carried out in terms of
the modified DCR 33/7 and Mhada's no objection certificate has been obtained as
12 cessed structures and Quinny House are to be rehoused free of cost.
Therefore provisions of MOFA will not be applicable, it had ruled.

Thursday, 1 September 2016

Hearing a plea against the occupants and owners of 10 flats
in a housing society in Mulund (W), Justice Gautam Patel ordered them to vacate
the apartments within four weeks.

MUMBAI: A handful of
flat owners cannot hold a housing society to ransom over redevelopment, the
Bombay high court has ruled.

Hearing a plea against the occupants and owners of
10 flats in a housing society in Mulund (W), Justice Gautam Patel ordered them
to vacate the apartments within four weeks. The high court said in case this is
not done, the court receiver can take the help of the police to evict the
occupants.

"The majority of (society members) have
accepted the entire proposal; some have accepted the whole of it. How they can
oppose it now, and on these grounds defy logic, common sense and the very
purpose of the Maharashtra Cooperative Societies Act," said the judge.
"If every single member is entitled to ventilate every single grievance
and to hold the society to ransom, no society will ever progress. It is not a question
of the majority dominating the minority, or of this being somehow egregious;
what is shocking is the manner in which a minority has attempted to hold the
majority to ransom. That is intolerable." The HC has stayed its order for
three weeks.

Constructed in 1947, Azad Nagar Cooperative Housing
Society, a ground-plus-two-storey structure with 36 apartments on Netaji
Subhash Chandra Road, is spread over 1,237 sq m. In 2009, at an annual general
meeting, the society members decided to redevelop the building, which is in a
dilapidated condition, and approved the bid of Maya Developers in 2012. The
builder offered to pay the flat owners Rs 14,000-Rs 18,000 per month towards
transit accommodation and give the existing flat owners apartments ranging from
485 to 620 sq ft in the new structure.

But around 2014, some of the members, including
flat owners who had earlier given their consent, opposed the redevelopment,
especially the choice of the developer, and moved court. There was no relief
from the cooperative court and subsequently the developer approached the HC
seeking the eviction of the opposing flat owners. The developer claimed that he
had already spent over Rs 4 crore on the project. The HC held that it had the
jurisdiction to hear the case and remarked that "a handful cannot hold to
ransom the interests of the majority in a cooperative society".

The court said the housing society supports the
developer and the opposing flat owners and occupants had not been able to point
out that the developer had been wrongly favoured over other builders.